We have been wrestling over how content can be funded assuming piracy will happen. While we've come up with a few partial solutions, we'd rather take the question to Catallarchy readers.

Traditionally, artists were funded through patronage for content creation. This led to some amazing music (cf. music history). Currently recording artists make most of their money from content reproduction in the form of concerts. From the artists' perspective, album creation has been reduced to expensive advertising. With the RIAA distributing, artists make pennies; with Napster distributing, artists make nothing. That sucks, but shows no indication of changing. The fans are the big losers here, because they can't send a clear price indicator to the artist to make more albums.

What would be a good system for letting fans indicate their demand for new content? How do you incentivize content creation when creators won't be making any money on it's use?

I guess perhaps they could just give up hopes of being rich and make money directly from concerts, performances, and donations. It may sound bad, but the market does not automatically guarantee that the particular profession you choose will even be supported at all, let alone be profitable.

Note that ubiquitous "piracy" on an individual level does not necessarily mean the end of copyright privilege based revenues, which may remain possible to extract for public, commercial use for a long time (eg use in advertising).

Another possibility I forgot to mention, but was hinted at in the article, is the idea that advertising might support art by being inside the art itself - the most extreme example of this sort of thing would be something like the kid's show "Pokemon" where the show seems to have no point other than to indirectly praise pokemon merchandise. Admittedly this may seem repugnant, but I don't think it's necessarily as bad as it sounds, or that all art would be funded this way.

It's not just Pokemon, Stefan. Just about every anime produced by Bandai is this way. In fact, Macross: Do You Remember Love has "subliminal" advertising in it. The Japanese are way ahead of us on this one :)

Stefan's suggestion was also used by the one-hit-wonder band Sigue Sigue Sputnik, whose album "Flaunt It" had advertising between each track. They didn't sell all the spaces, which they filled with spoof ads.

Support through advertising (e.g. product placement) also is vulnerable to piracy: piracy of the goods being advertised. There must be an un-piratable element in goods. And indeed there is. A pirated copy of a CD is, bit by bit, just as good as the original. But a pirated signature is not. (Sure, if the customer is fooled he might accept a pirated, i.e. fake, signature, but the difference is that he does not have to be fooled in order to accept a pirated copy of music or film. And customers will therefore look for and pay for mechanisms to ensure that the signature they receive is the genuine article and not a fake.)

So: creators will be saved from piracy by the fact that, while customers are indifferent between originals and pirated copies for certain things, they are not indifferent for other things.